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Defending Internal Audit; Expanding the Voice of the Private Sector

A column by Mitch Harper, Member, Fort Wayne Common Council - 4th District

Tonight, the Fort Wayne City Council will take up an ordinance introduced by the administration concerning the Internal Audit Department.

At budget time each fall the last several years, there have been suggestions within the Council that
funding for the Internal Audit Department could be cut for the reasons that the
department is redundant or unneeded.

Last year, the Council only funded the Department through the first part of the year. I opposed that motion as did just two other Council members. I am often the most fiscally conservative member of Council but cutting the full year funding of the Internal Audit function was not warranted. Particularly when the work of Internal Audit has led to better control of spending by other city departments.

The Internal Audit Department of the City of Fort Wayne does a decent job conducting performance audits of various functions of city government. An internal audit function, conducted properly, can enhance compliance with laws and regulations, improve risk management, and create more effective controls.

In response, I've been a consistent defender of the value of the Internal Audit Department these past four years. I've explained before Council that the Department does something very different from the State Board of Accounts and that it has consistently issued reports that have brought to light a variety of practices within city government that need improvement. Those practices have ranged from the serious to matters of lesser consequence but in each of the reports, there have been matters of value produced.

The Internal Audit Department is not comprehensive. That is, it does not and cannot, as a practical matter, provide an overview of every other city function on an annual basis. It must pick and choose. It does that with the help of an oversight board of which the City Council appoints one member and the rest come from the adminstration or are appointed by the Mayor.

There are standards for Internal Auditing which are generally accepted across industries in the private sector and which are promoted by the Institute of Internal Auditors. Part of those standards involve the selection and frequency of internal audits of discrete functions within an organization but also guidance as to methods and measurements. That is part of the function of the oversight board.

Yesterday, the Journal Gazette editorial page gave a misimpression regarding last fall's Council discussion of the Internal Audit Department budget. The editorial read:

"Some council members wrongly suggested the department duplicated
services provided by the State Board of Accounts, and some suggested the
department’s work, in critiquing other city departments, could create
ill will.

The debate seemed to overlook the many instances when
the department uncovered savings or pointed out procedural lapses that
created liability issues or threatened safety."

As noted, the council did not "overlook the many instances". I spoke out defending the Internal Audit Department as I have consistently done and as two of my colleagues on Council did.

The Journal Gazette editorial noted that "City officials are proposing several changes to address some of the
City Council’s concerns in hopes of restoring the department’s budget
so that is can operate through the remainder of the year."

However, some of those changes do not so much address some of the City Council's concerns as raise new ones. Some are related to changes in the way requests for special audits by the City Council would be handled. But I'll put that aside in order to discuss the changes in appointments to the Internal Audit Committee.

There are changes to the IA Committee make-up including switching from a recommendation to the Mayor by the Allen Country Bar Association of someone familiar with governmental finance to a recommendation of the Greater Fort Wayne Chamber of Commerce of a Certified Public Accountant.

As many know, there has been an ongoing discussion of reorganization of the Chamber, the Economic Development Alliance and the Northeast Indiana Regional Partnership. Aside from the fact that the Chamber may cease to exist as a distinct entity in the future, there is no particular improvement of appropriateness of having the Chamber choose a CPA (Certified Public Accountant) or CIA (Certified Interal Auditor) than the Bar Association choose someone familiar with government finance.

There is already a member recommended for an appointment by the Allen County Chapter of the Institute of Internal Auditors. And while Certified Public Accountants hold a license from the State Board of Public Accountancy, there is not an equivalent state licensure for Certified Internal Auditors.

If there is to be a move away from the Bar Association recommendation I would rather see a member nominated by a vote of Allen County resident, licensed, accountants in much the same way that the Allen County licensed attorneys vote on members of the Judicial Nominating Commission.

As for the Council appointment to the Internal Audit Committee, I suggested two years ago that it might be appropriate for the Council to make an additional appointment of someone who is not employed by another unit of government. Council's appointment has traditionally been someone who is a controller or deputy controller of another local governmental unit.

Two years ago, as Council President, I directed that the Council engage in outreach to solicit applications from citizens who would be willing to serve. I was pleased - and I think other Council members were, too - with the response from private citizens with expertise who were willing to serve. In the end, the Council again appointed a person employed by another local government.

I renewed the suggestion last year. This is the time to ensure that a Council choice comes from the private sector.